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 By agreeing to nominate three additional Icahn representatives to
its board, Herbalife will potentially allow the 78-year old activist
investor to control five board seats on a 13-person board.
Herbalife shares, which closed up nearly 7 percent on Monday, also
got a boost from news that rival direct-seller NU Skin Enterprises
Inc had been fined just $540,000 by Chinese regulators for illegal
sales practices.
NU Skin's shares closed up 18.2 percent.
Herbalife shares had lost more than a third of their value since NU
Skin said in January that Chinese authorities had launched probes
into its business.
Herbalife has since said its own practices are being investigated by
the U.S. Federal Trade Commission.
Short-sellers and other critics have accused companies such as
Herbalife, NU Skin and USANA Health Sciences Inc of running
pyramid-type schemes, questioning their sales model under which
distributors make money not only from their own sales but from
people they recruit as distributors.
Icahn, who owns a 16.8 percent stake, told CNBC on Monday the value
of his stake in Herbalife has increased by about $300 million since
he bought into the stock in early 2013. The investor said he thinks
the stock price is still undervalued in the long term but conceded
that it could face "rough times" in the short term as the battle of
the company's future heats up.
Pitted against him is the company's most prominent critic, fellow
activist William Ackman, who unveiled a $1.16 billion short position
against Herbalife in December 2012.
Ackman, who heads Pershing Square Capital Management, described
Herbalife as his fund's biggest-ever loser as recently as February,
but his losses have shrunk dramatically as Herbalife's shares have
stumbled.
Since January, Herbalife's stock price has dropped 32 percent,
falling sharply in the last two weeks as investors expressed concern
about the Federal Trade Commission's probe into the company.
The investor renewed his attack on Herbalife earlier this month when
he said he had evidence the company was breaking direct-selling laws
in China, its fastest-growing market.
Herbalife has said it tweaked its business model in China to meet
local regulations. "These (changes) include company operated retail
stores and certification procedures for sales personnel," the
company said in its annual report.
Ackman has also accused Herbalife of unfairly targeting Latinos and
other minority groups.
Later on Monday, Herbalife said it had hired Angela Arboleda, former
adviser to Democratic Senator Harry Reid, to manage relations with
minority communities including Hispanic, African American and Asian
American.
Apart from her new role as vice president, community engagement and
health policy, Arboleda will also serve as the lead lobbyist for
Democratic outreach and work on policy issues for the company,
Herbalife said.
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"RESOLUTE IN OUR COMMITMENT"
With the addition of three directors, Icahn will have five seats on
the 13-member Herbalife board.
Their presence could help, he said noting that Icahn's board members
have historically been able to boost a company's share price
considerably.
"Our record of going on boards is phenomenal," Icahn said in a
television interview with CNBC.
As part of a revision to an agreement struck in February last year,
Icahn Enterprises employees Hunter Gary and Jesse Lynn, along with
James Nelson, an independent director of Icahn Enterprises, would be
put up for election to the board.
Gary is a senior vice president of Icahn Enterprises, while Lynn is
assistant general counsel. Nelson has been on the Icahn board since
June 2001.
Gary and Lynn would replace board members Carole Black and Michael
Levitt whose terms are expiring. Nelson will replace Colombe Nichols
who is resigning from the board.
Herbalife had postponed its annual shareholders meeting to April 29
from April 24 while it talked with Icahn about an increase in board
representation.
Icahn nominees Jonathan Christodoro and Keith Cozza have been on the
Herbalife board for about a year.
"We remain resolute in our commitment to the long term success of
Herbalife," Icahn said in a statement.
A spokesman for Pershing Square declined to comment on Monday's
announcement.
Icahn will continue to have the right to buy up to 25 percent of
Herbalife, Herbalife said. He declined to say on Monday whether he
might be planning to buy more shares.
Herbalife shares closed up at $52.86 on the New York Stock Exchange
on Monday. They had risen nearly 9 percent in regular trading on
Monday.
NU Skin shares closed up 18.2 percent at $88.66, while those of
USANA closed up 9.4 percent at $72.97.
(Additional reporting by Maria Ajit Thomas and Mridhula Raghavan in
Bangalore; editing by Savio D'Souza, Ted Kerr and Bernard Orr)
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